ABA Credit Credit Conditions Index, June 2022

While consumer and business credit markets remain generally strong, banking economists expect credit conditions to weaken over the next six months, according to the latest Credit Conditions Index from the American Bankers Association. published today.

The latest ABA Credit Conditions Index Summary examines a series of indices derived from the quarterly outlook for credit markets produced by the ABA’s Economic Advisory Committee (EAC), made up of chief economists from major banking institutions in North America. Readings above 50 indicate that, on the net, economists expect business and household credit conditions to improve, while readings below 50 indicate expected deterioration.

The third quarter 2022 report reveals that near-term expectations for the quality and availability of credit fell sharply for the second consecutive quarter, for both consumers and businesses. The latest readings provide a stark contrast to credit market conditions in 2021 and early 2022 and reflect continued headwinds from inflation and supply chain disruptions. EAC members have revised down their forecast for real economic growth in 2022 from 2.5% to 1.6% (Q4/Q4).

“While consumers continue to benefit from an exceptionally strong labor market, Russia’s invasion of Ukraine and China’s ‘zero-COVID’ policy are adding to inflationary pressures and increasing economic uncertainty,” said Sayee Srinivasan, chief economist and head of research at ABA.

In the third trimester:

  • The Overall Credit Index fell again in the third quarter, falling 20.1 points to 20.8, the weakest reading since the end of 2020. The reading below 50 indicates that banking economists expect market conditions credit deteriorate over the next six months.
  • The Consumer Credit Index fell 15.7 points to 22.9 in Q3. Half of EAC members expect the availability of consumer credit to decline over the next two quarters, while only one expects it to strengthen. As for consumer credit quality, two-thirds expect it to deteriorate over the next two quarters, while none expect it to improve. Overall, the reading below 50 indicates that EAC members expect consumer credit conditions to weaken over the next six months.
  • The Business Credit Index fell 24.4 points to 18.8 in Q3. Half of EAC members expect business credit availability to decline over the next two quarters, while only one expects it to strengthen. Meanwhile, all but two EAC members expect corporate credit quality to deteriorate over the next six months, with none expecting an improvement. Overall, the reading below 50 indicates that EAC members expect corporate credit conditions to weaken over the next six months.

“As the Fed hikes rates to fight inflation, the outlook for credit markets has unsurprisingly weakened,” Srinivasan said. “The good news, however, is that jobs are plentiful, consumer demand is strong and businesses are continuing to invest at a healthy pace. For these reasons, most banking economists remain cautiously optimistic about the path of the US economy for the rest of the year.

The full report with detailed charts and discussion of the broader economic context is available here.

About the Credit Conditions Index

The ABA Credit Conditions Index is a suite of proprietary diffusion indices derived by the American Bankers Association from surveys of chief bank economists at major North American banking institutions. Since 2002, bank economists have forecast the quality and availability of credit for businesses and consumers, indicating whether they expect conditions to improve, stay the same or deteriorate over the next six months. . Readings above (below) 50 indicate that, on the net, these expert trade analysts expect credit market conditions to improve (worsen). The contributions of banking economists are also weighted in the indices. This data will remain anonymous, but historical index values ​​are available upon request.

Answers to frequently asked questions about the ABA Credit Conditions Index can be found in an appendix attached to the outlook. This report and all previous reports are available at https://www.aba.com/news-research/research-analysis/aba-credit-conditions-index.

The American Bankers Association is the voice of the nation’s $24 trillion banking industry, made up of small, regional and large banks that together employ more than 2 million people, protect $19.9 trillion in deposits and grant 11, $4 trillion in loans.

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